DAIRY PRODUCE.

Taranaki Daily News, 26 April 1922, Page 7

DAIRY PRODUCE.

A POOL PROPOSAL. AN IMPORTANT SCHEME. ONT LINES OF MEAT. POOL. UNANIMOUS SUPPORT IN SOUTH TARANAKI. A meeting likely to be fraught with important issues to the dairying industry in New Zealand was held in Hawera on Monday, when the details of a proposed scheme for the pooling of dairy produce, on somewhat similar lines to the meat pool, was placed before a representative gathering of South Taranaki dairy factory directors. After tlie scheme had been outlined by Messrs. Morton, Brash and Goodfellow, the meeting, which was the first of a series to be held throughout the Dominion, unanimously decided to support the scheme. Mr. Arthur Morton (chairman of the National Dairy Association) presided, and there were also present on the platform: Messrs. H. Forsyth, T. C. Brash (secretary of the National Dairy Association), and W. Goodfellow (managing director of the New Zealand Dairy Association). The following dairy factories were represented: Hawera, Lowgarth, Whenuokura, Kakaramea, Stratford, T. L. Joll, Ngaere, Tuna, Waingongoro, Pembroke Eltham, Kaupokonui, Riverdale, Ararata, Opunake, Opua Road, Pihama, Mere Mere, Melrose, Cardiff, Manutahi, Alton, Mells, Mangatoki, Kaponga, Normanby and Wai-toi-toi. The chairman, in asking the opinion of the meeting as to whether the proceedings should be open to the Press, eaid that he personally saw no objection. Up to the present the proceedings had been kept dark, and it was only during the 'last day or two that the general purport lof the meeting had appeared in the papers. Whether or not the Press were excluded the matter would be fairly public, and he thought they would have nothing to lose by admitting the Press. Mr. Marx moved that the Press be admitted.

Mr. Corrigan, in seconding, favored laying their cards on the table. They must expect a lot of opposition to the scheme, the same as the meat pool had. but he asked them all to use their own judgment and not be influenced by arguments adduced by y those who had something to lose if the pool was a success. The motion was carried. HISTORY OF THE MOVE.

The chairman, at the outset, said that the matter of pooling dairy produce, though new to many of them, was not new as far as the dairy industry was concerned, having been mooted twelve or thirteen years ago by the National Dairy Association. It had been discussed at different times since by dairy factory directors, but no definite move had been made towards the establishment of a pool until the present. Dairy factory directors in South Taranaki had been very active in discussing the matter during the past twelve months, but it was not until the Government had 1 taken steps in regard to the meat pool, and had introduced the compulsory system, that there was any possibility of seeing it established successfully. They had expresed dissatisfaction from time to time with the marketing conditions at Home, feeling that they were not getting the best results from the mar keting of their dairy produce. Suggestions had been made to improve these conditions, and different means had been tried, with more or less success, to change the conditions, but they did not bring about the desired result. Mr. Goodfellow. managing director of the N.Z. Dairy Association, recently spent several months in London in connection with the marketing of the large output of his company, and he had come bark convinced that the only effective step the New Zealand producers could take would be to establish a pool. While he was away in England, the meat pool had become an established fact, with the compulsory system, which the speaker considered should also bo applied in connection with the dairy industry. NEED FOR NEW SYSTEM.

Mr. Morton expressed the opinion that unless there was some radical change in the marketing conditions they would never get the best results. The pool, if established, must be such as would embrace the whole of the dairy produce of the country. It would prove impossible to expect the whole of the dairy factories to voluntarily join, but if compulsion was a good thing for the meat pool, it should be good in connection with the dairy industry. If they did not hs.ve the whole of the produce in the pool, they might as well have no pool. It was only by bringing the whole of the produce into line that they could expect to have better handling and marketing of their produce. The Government had assisted the meat pool by legislation and financial guarantee, and it was only reasonable to assume that whatever measure of assistance had been extended to the meat pool, the same would be extended to the proposed dairy pool. The scheme, he explained, had first been formulated at an informal meeting held in Wanganui, when representatives of South Taranaki factories bad met Mr. Goodfellow and his chairman (Mr. Morton) and discussed the matter, which had then been placed by circular letter before dairy companies, which had been given ample time to discuss the question, and form some opinion as to its merits or otherwise. The matter would now be placed before them in concrete form, and after discussion it would be necessary to pass some resolution, and, if favorable, set up a committee or appoint delegates to meet delegates from other centres to formulate definite lines for the establishment of the pool, wr*h full power to go to the Government and make representations on behalf of the industry so as to put the pool on a satisfactory footing.

ALL MUST BE IN. He again stressed the necessity for having the whole of the dairy produce in the pool if its aim was to be achieved, pointing out that some two or three years ago they had discussed other proposals for improving the marketing of their produce, but while these might have had the effect of somewhat improving the marketing conditions, they had not obtained what they had desired because they did not have the bulk of the produce behind them. Unless they could get the bulk of the produce behind them it would be useless to attempt to initiate the pool. The introduction of the compulsory principle would bring in the whole of the produce, and give them a strength they never had before Tins would enable them to meet the difficuloi mia ng&g Is

1 marketing and handling of their produce lin the Home market. Following this meeting, meetings would be held in other parts of the Dominion, and, if it was the general desire of the producers to pool the produce, the delegates would i meet and carry the proposal to its end. He pointed out that the time was somewhat short if they wished to have the scheme in operation next season, because it would be necessary to get legislation through Parliament, and it would probably be July or August before this could be done. The Prime Minister had expressed his sympathy with the proposal, and given his assurance that if a substantial majority of the farmers favored the pool there would be no difficulty in getting the necessary legislation into operation for next season. One of the great merits in connection with the scheme was that the produce would be sold os New Zealand produce, irrespective of the particular brand of the factory, and be sold on the actual merits of the dairy produce itself. At present the produce was graded under three grades, practically no discrimination benig made regarding the price paid all factories turning out first grade. There was no incentive for factories to improve the grade as long as they turned out first grade. If the produce was paid for on its merits, it would give a stimulus to directors end managers to raise the standard of the produce and to increase the grading points, and so turn out produce of the highest quality. They had for some time been endeavoring to get the Dairy Division to introduce a grade above first grade, say, superfine, for factories grading over 92 or 93, but so far the Dairy Division had been unable to accede to their request, but he understood the establishment of a pool would be sufficient inducement to the Department to establish this higher grade. BETTER MARKETING.

At the suggestion of Mr. J. B. Murdoch, the circular issued to dairy factories on April 19 by the National Dairy Association was read. This impressed on directors the urgency of arranging an improvement in the method of marketing butter and cheese exported from the Dominion. The circular continued: “The glut and consequent slump in London, during November and December last, has proved, beyond all doubt, the imperative necessity of some prompt and radical change in the existing method of disposing of the exportable surplus of butter and cheese. Some national organisation must be set up. which will effectually and permanently rectify the present very unsatisfactory state of affairs. What is required is a concern which will be powerful enough to: (a) Regulate shipments; (b) open and develop markets other than London; (c) advertise New Zealand butter and cheese; (d) control distribution with the object of obtaining full market value for butter and cheese; (e) stabilising markets by preventing congestion and speculation; (f) make advantageous freight contracts; (g) co-operate with Denmark and Australia in the marketing of dairy produce.” Details of the proposed scheme were also given. | Mr. Corrigan explained what had led up to the calling of the meeting. Mr. Forsyth, who was indisposed, endorsed the chairman’s remarks. With the high price of land, requisites and labor it was necessary that farmers should make the most out of their farms. Indeed, jt was only by increased production, controlling and stabilising the market, that some of those who had gone on the land at,high prices would he able to make ends meet. The difference between the prices of New Zealand and Danish produce was very marked. It was generally admitted that New .Zealand produce was equal to Danish, but as regarded price the Danes beat New Zealand out of sight on account of their continuity of supply, better marketing methods, and loyalty to themselves.

CO-OPERATIVE MOVEMENT. Mr. T. C. Brash said much good might be done by joint action in any industry. He suggested the control of industry for the general good rather than in the interests of any industry. The present movement was a co-operative one. Every one knew that if it were launched every one else would be in it. There was usually a tendency on the part of some to stand out of any movement until it was an established success, and by standing out they kept it from being successful. He wanted to disabuse them of any idea that it was a Government scheme. The Government was prepared, if the producers showed that they wanted it, to give the board power to carry it through to success. He believed the Government would also be prepared to financially guarantee the scheme. The Government, however, would make no undertaking until they had clear evidence that the producers 1 wanted it. They were now approaching a new season, and, from the experiences of the last season, it must be clear to all that some sort of central organisation was required. He quoted figures showing the great slump in prices, pointing out that had there been any sort of control, butter would not have come down as low aa it had been in December. Cheese in July was 140 s, in September 110 s. while in October and oNvember it had fallen to 78s, rising again at the beginning to December to 100 s and 108 s, falling again by the end of December to 80s and 98s. At the end of February it had fallen to 80s, and at the end of March it stood at from 94s to 100 s. Butter in July stood at 262 e. In September it had fallen to 2205, and in October and November it stood at 200 s to 2055. whilst by the middle of December it had come down with a run to 113 s, rising again soon after the New Year to 140 s, at which price it remained until the middle of March, rising to 195 s at the end of March.

ATTITUDE OF TOOLEY STREET. Could any one, he asked, claim that the market price was governed by the law of supply and demand? He was not blaming Tooley Street. There were probably no bigger percentage of rogues ■in Tooley Street than were in that meeting. Tooley Street was composed of clever men who knew their business. The idea of the present scheme was to link up all the good quality produce, and send it Home to be disposed of at a price agreed upon between the seller and the Tooley Street merchants, whose ability and organisation would be available to dispose of it. He felt sure the principal mercliants of Tooley Street would welcome the scheme. Under the present system some agents obtained more produce than tlieir firms could handle or hold, and these firms were compelled to cut the price in order to get rid of it, and, of course, the other merchant had to cut his price also. The proposed scheme would make it easier for the menehants to get a /reasonable market price for the produce, and prevent the cutting of New Zealand produce by New Zealand produce. Hr would not suggest that they would .have sufficient power to the of all pro-

dace. They could not expect to reach' the ideal at once. There was, however, I a good deal of work that could be done if they would only tackle it with a reasonable chance of success, and providing the whole of the produce was in. the pool. In the past a number of dairy factories had been held back from joining any scheme by the tiecesaity,, for parochial reasons, of requiring to &now what their neighboring feretories were doing before committing fchemselvas to any scheme. Under tuis propped scheme each director would know ihat his factory was not included unless all were in it. He it clear that the Government woufcd not consider passing any legislation unless a very big proportion of the dairy factories wanted it. He read telegrams and letters showing that Mr. Ellison, the representative of the National Dairy Association in London, strongly advocated the pool. Concluding. Mr. Brash remarked that the movement came from the factories themselves, having been initiated in South. Taranaki. The Danes, he said, fixed the price of their butter from week to week. If the week’s supply was cleared they raised the price, but if the demand fell off they reduced, it. Where New Zealand butter was retailing at Is 4d end Is 6d, Danish was making 2s and 2s 2d, though it was known that there was no higher quality butter anywhere than New Zealand. Much had been done in the past to improve the marketing conditions, but he considered the pool the best solution. He also touched on the need for advertising the produce in England. POSITION IN LONDON.

After the luncheon adjournment, the chairman introduced Mr. Goodfellow, who gave an interesting address on marketing methods in London, pointing out that he had been sent Home in connection with the control of the New Zealand Dairy Company’s sale of produce in London. He arrived in London in July, and took an office in Tooley Street. During the first month he got very little information, discovering that whereas the American merchant poured out all he had to say, the British merchant sat tight and listened to all one had to say. He detailed the causes that led to the slump in prices. When in America, on his way to England, he had negotiated for the exclusive sale of 5000 tons of butter to a New York syndicate at a price equivalent to Is 11.22 d f.o.b. New Zealand, subject to irrevocable credits being established. Before being finally settled, a cable was sent broadcast all over the world by a Sydney firmt quoting Australian butter at 150 s per cwt. c.i.f., which was about 7d less than his quotation, so that deal was off. The Americans had no idea that New Zealand butter was different from Australia, and thought the butter was the same quality. The Australian firm possibly had very little butter to sell, but the cable nevertheless had a very demoralising effect on the market.

During his first month at Home he made investigations and got acquainted with the trade, and saw how the butter was handled. There was no chance of introducing the pat trade, as the customer insisted on seeing the butter wrapped up before buying. It was exceedingly difficult to get delivery of the early season’s butter. They had shipped their April and May surplus to arrive in October, but owing to storage being taken up with frozen meat the shipments were hung up for seven weeks, four or five shipments being hung up altogetiher. They had endeavored to get the ships removed to Southampton, where there was plenty of storage room, offering to pay freight, but they could not obtain even this concession, and, as a result, his company had lost £128,000 through the produce not being unloaded within a reasonable time. The merchants were just as anxious to get the boats unloaded, as they were anxious to dispose of the produce to meet their drafts, and, with him, used every effort to obtain delivery, securing expert advice as to whether they could compel the shipping companies to give delivery or whether they had a claim for damages. They found, however, that meat people had much too strong a contract, and that the dairy people had no claim against the shipping'companies.

THE DROP DESCRIBED. During the first week iu December, various boats were unloaded. At that time there were in stock 20,000 or 25,000 tons of Australian and New Zealand butter purchased by the Imperial Government. The Government, instead of selling this in August. September and October, held on to it in the hope of getting better prices. He detailed the steps he took in endeavoring to hold up the prices when there was a regular scramble to secure delivery of the four or five shipments. His company controlled one-third of that butter from New Zealand, and he met his various agents and fixed the price at 200 s. Next day other agents had dropped the price to 190 s, so he fixed the price of his produce definitely at that for a week, so as to stabilise the market for a few days, as more than half his produce had been sold subject to fixed price when delivery was given. At the end of the week certain people were selling at 1755, and as he found it quite impossible to hold the market, he removed all restrictions. If he had held two-thirds instead of onethird he might have been able to hold the market, which kept dropping, until in a few days it was down to 150 s. Mr. Goodfellow next detailed the steps taken to deal with the old Government stocks, which the Government had offered to a syndicate at 100 s New Zealand and 84s Australian. He said that, after considerable negotiation, it was arranged that the New Zealand Government and several strong Tooley Street houses should purchase this between them, it being hoped to make about £50,000 for each, but that a couple of days before official acceptance was cabled from New Zealand, the butter had been purchased by other Tooley Street merchants, who evidently made £lOO,OOO out of the deal. They also did the same with the Australian butter. This, he said, showed the power possessed at the other end, where there was a magnificent organisation possessed with brains, capital and experience. It was quite useless for the New Zealand producer to set up an organisation to fight them, as the New Zealand producer had neither the necessary capital, experience nor brains. The right thing was to make use of that organisation, but, at the same time, set up some sort of control over the produce that would give the producer the right to regulate the prices at which it should be sold. There were several lessons they had learnt from the smash, a smash that was a record in the produce business, where prices fell from 260 s in July to 115 s in December. The first lesson was the absolute necessity of some sort of effective price control. In this connection he said that if his company had been able to control twothirds of the produce at the time of the unloading of the ships, they would have got out with a profit, instead of a loss of £128,000. They had appointed Mr. 1,1. B. Wright ns their London representative, and set up a kind of coiilrol with the four agents who handled their pro-

duce, arranging for a monthly audit of [all consignments, because it had been | the practice of firms to pay on the prices ruling in London, and if they sold produce, say, to their branch at Manchester at an increased price, that profit went to the firm. The company now received actual sales for all produce, and to ensure this each merchant had opened a special consignment book, each entry being systematically checked. They had also agreed to submit daily stock and sales sheets, and were paying the company actual and not average prices. They had further arranged to fix the minimum price for first and second grade produce, and the merchants had agreed not to sell below these prices. It appeared to him that the same principle might be adopted and applied to the whole of the produce. There would be very little difficulty. It was necessary to provide in the contract that on arrival the responsible party could have the right to divert produce from one agent to another, if necessary, as at times a merchant became overloaded, and there waa a limit to what a firm could handle at top prices. In New Zealand all the agents met the factories on a parity, but some of them obtained more on consignment than their firms could reasonably handle.

SAVING BY POOLING. On the whole he had formed a good opinion of Tooley Street. As far as ability and experience went it could hold its end up with any in the world. The three essentials were capital, experience and brains. If they wished to open their own floor it would be difficult to get the combination of the three. They might find the brains, and also, with difficulty, the capital, but they could only get the experience after very many years and very great losses. I The coastal farmers of Australia had • opened their own floor, but without conspicuous success. On a. strong market they would get along all right, because every one was chasing after the produce, but on a weak market they had neither capital to hold it nor experience to find other outlets for their produce. He estimated that by the pooling scheme they would save approximately £120,000 a year, including the half per cent, that firms paid their New Zealand agents. Moreover, after the scheme was well established the main object would be to co-operate with similar organisations in Denmark and Australia with a view to stabilising the whole supply on the English market. He pointed out that the Danish people fixed the price from week to week, according to the supply and demand, and as a result, during the slump in December, Danish butter never sold for less than 160 s when New Zealand was bringing 115 s. This was possible because they had the backing of their factories. There was no speculation with Danish butter, as it was only possible for speculators to profit when the price was pushed up and down. The Danish dairy authorities would gladly welcome their organisation, and if the three organisations were to work together it should be possible to stabilise the butter market of Great Britain.

Mr. Goodfellow proceeded to explain , the scheme as outlined in the circular, ' pointing out that it had only been . drawn up roughly, so that it could be , finalised by the meeting of delegates in Wellington. Its main points were to regulate shipments, open and develop ’ markets with places other than London, which at present was the dumping i ground of the produce of the world. It ’ ; was highly desirable that western ports and other countries should be utilised for the distribution of New Zealand pro- ‘ duce. It was also necessary to ad ver- , tise New Zealand butter generally, and not any particular brand. Regarding the . name of the proposed company, he said ' they considered it advisable to leave out the word “co-operative,” as the people , at Homo had no time for co operative selling concerns, though they favored cooperative producers. If probably 75 per ; cent, of the factories in New Zealand ’ favored the scheme, there would be very little difficulty in getting Parliament to pass the legislation necessary to authorise compulsory shareholding. Though the legislation would authorise a. levy of a farthing per pound on butter, and-one-eighth of a penny per pound on cheese, there would be no cash required to form the company, as the savings in commission and other ways would yield a substantial profit, and in ten years it was anticipated would provide the milion capital required. It might be that there was no capital required in connection with the meat pool, but this he considered its weakness, NECESSITY FOR CAPITAL. Without capitalising the profits they would be liable to income tax at the rate of 8s 9d in the pound, but when capitalised they would be credited to the various factories, who in ten years’ time would thus have paid up all the capital without providing a penny cash. It was necessary to have capital, 'because they did not know what further developments might be required. They might, for instance, wish to market in Canada, U.S.A., or the East. It was, therefore, absolutely necessary that the scheme should be put on a strong financial basis. The directors should be elected so as to represent the industry as a whole, and not any particular section, though no doubt strong cheese districts would elect cheese representatives and butter districts elect butter men, so that representation in this respect would be evened up. It was suggested that the chairman should be a commercial man, nominated by the board, and appointed by the Government. It was important that they should have a first-class commercial man at the head of the scheme to put his whole time into the business at this end. The board of directors here could ap- : point the permanent board in London, 1 which would consist of at least one ! cheese and one butter representative, 1 with a managing director, and it was ’ most important to have the right man , at the London, end of the business.

Tn concluding, he remarked that the scheme as outlined was only a rough one, with the idea of bringing the matter before them in concrete form, and was subject to amendment at the meeting of delegates in Wellington. (Applause.) THE DISCUSSION. Mr. Pierce considered that the levy should be an even amount on the but-ter-fat supplied to the factory, and not on a cheese or butter basis. The chairman said that the levy was only intended to apply on the exportable amount of each factory, so that the but-ter-fat basis could not be utilised. Mr. Marx (Mangatoki) considered it would be more satisfactory if the levy was on a butter-fat basis, as the export factory made the price for the local factory. The chairman said that this would raise difficulty in the South Island, many factories in which did not export one tenth of t'heir output. Mr. Corrigan (Hawera) said that the cheese men were of opinion that the butter factories would have the advantage, because, whereas the levy

the rate of two to one, a pound of ‘butter-fat made 2.65 lbs. of cheese, and only 1.2 lb. of butter. The chairman said that the point was. not a material one.

Mr. Power (Waingongoro) asked if it would be possible to have a clause Included in the legislation protecting companies in the event of liquidation of the proposed company. ■Mr. Goodfellow said that his company, handling 6000 tons of cheese and 16,000 tons of butter, would undertake a big liability, and had carefully considered the matter. He did not think it would be possible to put the neces®wry clause through, but, in any case, he did not think companies would be worse off than at present. It was questionable whether it would be better to .cut out the letter of credit and have the Government guarantee against advances on store warrants as well as shipment. “ON RIGHT LINES. ■ Mr. Marx (Mangatoki) said that he was certain his company had this year already lost twice as much as their shares would cost through not having the proper organisation. He was satisfied the scheme was. on the right lines. He would move that the meeting approve of the proposal for the compulsory pool as outlined, subject to any necessary modifications. Mr. Corrigan, in seconding, said that he was certain if they could concentrate their produce in the English market they would save the £lOO,OOO they were paying agents. He estimated the cost of the scheme at £20,000, so that they would be saving at least £BO,OOO of the money they were paying someone else. Personally, he thought they would save one per cent., not a half per cent. Ir.

any case they would get their capital out of money saved. He urged that they pass the resolution unanimously. It was the first meeting held in New Zealand, and a unanimous vote would have a good effect. Mr. J. F. Phillips (Waitoitoi) considered that cheese and butter should be placed on a parity as regards levy. In reply to Mr. Feaver (Opua), the chairman said that on the New Zealand I output of last year he estimated that £l3 10s per ton of butter and half tliat on cheese would be required to provide the million capital, but he pointed out that under the scheme it was not anticipated that any capital would be required to be put in by dairy companies.

Mr. J. B. Murdoch (T. L. Joll) considered that the whole of the produce should be included, both local and export. The chairman said that they would make a mistake if they attempted to make the pool embrace local sales. There had been very little trouble in the past over local Sales, and what trouble there had been was caused by industrial factories themselves.

Mr. Murdoch held that the pool must control local produce, so aa to regulate the quantity that was retained for local sales.

The chairman agreed that the pool should have control over the shipment. Mr. J. R. Corrigan said the pool was set up to deal with the exportable surplus. The Government would take care that sufficient produce was kept in New Zealand to supply the local market.

, Mr. Ranford (Stratford) asked if Mr. , Goodfellow would favor produce being sent Home by factories bearing a num- ' ber instead of the factory brand. Mr. Goodfellow agreed that that was the ideal to be worked up to, i.e., to have a universal brand, and butter and cheese would be sold according to grade. SCHEME APPROVED. Some further discussion ensued regarding the financing of the scheme, Mr. Corrigan stating that the idea of the levy was to make the company financially strong. Some members favored a company with smaller capital. Mr. J. B. Marx said that every director should call ‘his shareholders together and make them fully acquainted with the scheme, as it was a complete change in the present day method. In reply to Mr. Murdoch, the chairman said that each company would receive the price its produce made. It would not 'be paid on the average price received during the year. Mr. Sinclair (Opua) understood that the idea of the scheme was to regulate the quantity placed on the market throughout the season, and he wished to know who would finance companies on any produce held over. Mr. Goodfellow considered there would be no trouble in arranging for finance. The resolution was then carried unanimously. Messrs. J. Marx (Mangatoki), J. B. Mudoeh (Joll’s), J. R. Corrigan (Hawera), and J. S. McKay (Riverdale) were appointed delegates to attend the conference in Wellington. Votes of thanks were accorded Mr Goodfellow for his interesting address, and to the chairman. MEETING AT NEW PLYMOUTH. A meeting of North Taranaki dairy I factory directors will be held at New’ Plymouth to-day, when the scheme will be outlined by Messrs. Morton, Brash and Goodfellow. Tn the evening those gentlemen will leave by boat for Auckland to address meetings at other centres in furtherance of the scheme.